Tullis Construction enters into a long-term fixed price contract to build an office tower for $15,000,000. In the first year of the contract. Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $3,700,000 in year 1 and collected $3,100,000 by the end of the end of the year. Refer to Tullis Construction. How much gross profit should Tullis recognize in Year 1 assuming the use of the percentage-of-completion method? (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)
A) $0
B) $2,625,000
C) $8,300,000
D) $600,000

Question

Quizplus · Accepted Answer

Gross profit = (Costs incurred to date / Estimated total costs) * Billed amount= ($3,000,000 / $8,000,000) * $3,700,000= $2,625,000

Tullis Construction Enters into a Long-Term Fixed Price Contract to Build